Abusive Trust Tax Evasion Schemes - Law and Arguments (Section III)

Taxation of Non-Grantor Trusts

If the trust is not a sham and is not a grantor trust, the trust's income (reduced by amounts distributed to beneficiaries) is taxable. The trust must obtain a taxpayer identification number and file annual returns reporting its income. The trust must report distributions to beneficiaries on Forms K-1 and the beneficiary must include the distributed income on the beneficiary's tax return. (IRC §§ 641, 651, 652, 661 and 662)